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SocGen Admits Fault, Pays $50Mn in U.S. Toxic Mortgage Bonds Case
[Photo: by Mohamed Yahya / Flickr]
Societe Generale agreed to pay a $50 million civil fine and admit to misconduct to settle Department of Justice charges that it fraudulently concealed from investors the poor quality of residential mortgage-backed securities (RMBS’s) it marketed and sold.
In a statement on Friday, the U.S. DOJ said the French bank concealed problems in a $780 million debt issue - SG Mortgage Securities Trust 2006-OPT2 - it arranged in 2006, and which has since left investors with "significant losses" that may grow further.
Societe Generale admitted to concealing how many of the loans were not underwritten properly and should not have been securitized, and that no borrowers owed more on their loans than their homes were worth.
The settlement papers quote from a senior Societe Generale banker who used a profanity in characterizing industrywide subprime lending practices at the time, and declared that "the whole process is a joke."
